In 2020, during the heart of the COVID pandemic, I remember listening to a FIRE-focused podcast hosted by two people who claimed to be financially independent and retired early. Even though it’s been over 16 years since I first started writing about FIRE, the topic still fascinates me. The journey toward financial independence is full of twists and turns, and people’s real-life experiences are always insightful.

But one particular episode caught me off guard. The two hosts—who built their entire brand on the idea of never needing to work again—asked listeners for financial support to keep their podcast running. Soon after, I saw an email making the same plea.

I remember thinking, Wait a minute. If these folks are truly FIRE, why would they need to ask for money to keep a passion project alive? Just fund it themselves!

I wasn’t judging the need for donations itself. Creative projects cost time and money, and compensation is deserved. But the ask didn’t match the premise. If they were genuinely financially independent, surely they could afford a few thousand dollars a year to sustain their own show, especially one that was meant to showcase the freedom FIRE provides.

How Much Does a Podcast Really Cost To Produce?

I have the Financial Samurai podcast (Apple, Spotify), so I know exactly what goes into production. A decently produced, professional-sounding episode doesn’t have to break the bank. Editing an hour-long episode might cost anywhere from $100 to $600 maximum depending on the level of polish and sound add-ons.

My biggest expense is time. Recording, editing, and uploading a 45-minute show can easily consume four to five hours between my wife (editor) and me.

That’s a significant chunk of time for something that isn’t mission-critical. I’d rather spend that time writing, hanging out with my kids, or playing tennis for exercise.

Not FIRE, But An Entrepreneur Instead

Given the manageable costs and the fact that FIRE is supposed to mean “work is optional,” it struck me as odd that these podcasters were asking for financial help. The more I thought about it, the more I suspected that maybe they weren’t actually financially independent.

Maybe they were simply entrepreneurs running a small business, worried about declining revenue and grasping for ways to keep the lights on during COVID. After all, they’ve never shared their net worth or passive income figures, so we have no idea.

As someone who helped kickstart the modern-day FIRE movement in 2009, I often hear a common criticism: some FIRE influencers haven’t really “retired,” they’ve simply traded a day job for entrepreneurship. There’s a lot of smoke and mirrors due to a lack of transparency.

I totally get it.

Podcasts don’t record themselves and articles don’t magically appear overnight. I spend about 15 hours a week writing, editing, and responding to comments and emails on Financial Samurai. To acknowledge this dynamic, I even wrote a post about being a fake retiree for 10+ years, to hang a lantern on the situation. So for the podcasters to ask money from their audience helps buttress this criticism.

For me, I love writing, connecting, and learning about personal finance. It’s endlessly rewarding to create something from nothing. After working 60+ hours a week for 13 years in banking, there’s no way I could just sit around playing golf or tennis all day in retirement. I need to stay productive and mentally stimulated for a two-to-three hours a day. The rest of the time is for exercise, childcare, travel, and relaxation. That is my sweet spot.

Along the way, Financial Samurai generates supplemental retirement income, which helps keep our safe withdrawal rate low, and both my wife and me out of Corporate America since 2012 and 2015, respectively. We hope the run continues indefinitely.

To not monetize my passion would be completely irrational. Running Financial Samurai costs about $10,000 a year for the dedicated server, email services, and tech support – excluding labor. However, I’d rather not ask my readers for donations because it feels inconsistent with my FIRE philosophy. A share or a review of my podcast or books are enough.

FIRE Will Make You a Terrible Entrepreneur

Although I stopped listening regularly after that episode, the show carried on. About a year later, one of the hosts left – presumably to pursue better opportunities with his time. The remaining host kept grinding, and today the podcast is thriving. I’d bet it now generates at least $150,000 in net profits. Awesome!

And that’s exactly the point. When you’re not truly FIRE—when you still need or strongly want more money—you hustle. You create. You innovate. You do everything possible to keep the revenue flowing. You even ask your audience for donations during a global pandemic, if that’s what it takes.

The hunger to survive and grow is what fuels entrepreneurship. But if you’ve already reached a level of passive income that comfortably covers your living expenses, that hunger fades. Without that pressure, you might not push as hard. You might even, gasp, become a terrible entrepreneur.

Here are some of the things I could do to make more money:

• Create a YouTube or TikTok channel
• Hire a team of writers to publish more articles and drive more traffic
• Bring on a salesperson to secure more advertising partnerships
• Become a paid speaker at conferences after writing two national bestsellers
• Do more personal finance consulting instead of throttle it to only one a month or when a book comes out
• Publish one or two podcast episodes each week, instead one one every three weeks or so
• Spend at least an hour a day posting on social media to boost engagement and traffic
• Pitch TV producers on shows, like my idea Love Is Money

The thing is, I just can’t be bothered, which is why I’ve kept my cadence since 2009. I didn’t leave a job to create another one in FIRE. Managing people and constantly selling yourself is exhausting. If you want to subscribe to my newsletter and read Financial Samurai. Great! If not, also great!

I’ve found a sweet spot – creating and interacting between 6 am – 7:45 am, then again for an hour after the kids go to bed – where I feel the most fulfilled and happy. Anything much beyond 20 hours starts to feel like a J O B.

I respect the grindcore hustle, but I simply don’t have the same drive at my age. Financial independence has sapped my entrepreneurial edge.

But if I was desperate for money for whatever reason, hell yeah I’d try out these new initiatives! I’m not too proud to work a minimum wage service job to provide for my family. I’ll do whatever it takes to ensure they are secure.

The Enthusiasm to Grind At Work Naturally Fades

Once you’ve reached the Minimum Investment Threshold where work becomes optional, the thrill of going above and beyond at a day job starts to wane. Coming in early or staying late feels pointless. Meetings get skipped, after-work drinks declined, and weekend boondoggles replaced with family time. Even that once-exciting business trip to New York loses its shine.

For entrepreneurs, the drop in motivation can be even steeper. Unlike employees, there’s no boss dictating the day. You have to be a relentless self-starter while wearing every hat—creator, marketer, accountant, PR rep, and business development lead.

Forcing yourself to build and grow a business when you already have enough passive income is a tall order. Entrepreneurship is way harder than being an employee.

As a result, you may have to resort to mind games to help keep that motivation to create alive.

When My Desire to Earn Returned

My drive to earn spiked twice recently: when my daughter was born in December 2019 and after buying a new house in 2023.

Lockdowns made entrepreneurship from home a logical focus. If the government was going to take away my freedom, I sure as hell was going to make the most of being online! Then the house purchase cut my passive income enough to reignite the urge to rebuild it.

But after two strong years of stock market gains and a rebound in San Francisco home prices, I’m back to sleeping in and caring less about revenue optimization. Our finances now depend far more on market performance than on entrepreneurial income. Maintaining the right asset allocation matters more than squeezing out extra business profits. Go bull market!

This lull is exactly why parents should never give their kids money for nothing. If they want spending power, they need to earn it. No matter how wealthy we become, showing at least a baseline level of hustle is essential so our kids develop a strong work ethic when they have nothing. Just say no to entitlement mentality!

The Comfortable Path Pays Less

Here lies the paradox of FIRE: you escape the rat race, but you also lose the urgency that drives extraordinary entrepreneurial success. When you no longer need to make money, you’re less inclined to chase every opportunity or sell your business for top dollar.

That’s not necessarily bad. It’s freeing. But to thrive as an entrepreneur without a profit motive, you need to be extremely greedy, deeply mission-driven, or truly love your product. Without that internal fire, long hours and relentless growth simply won’t happen.

Creative Longevity: FIRE’s Hidden Gift

If FIRE makes you a bad entrepreneur, at least it can also make you a longer-lasting one. Because I’m not burning out chasing revenue, Financial Samurai has endured since 2009, a lifetime in internet years. Many flashier sites scaled fast, burned hot, and disappeared when founders lost interest or ad dollars dried up.

My slower, steadier approach may never produce a headline-grabbing exit, but it delivers something equally valuable: staying power. I can keep writing, podcasting, and engaging for years because I genuinely enjoy the work. Enjoyment, not maximization, is what keeps a project alive.

Financial independence has made me a less aggressive entrepreneur but a happier human. It also gives me time to set an example for my kids. I want them to see the value of curiosity and discipline, and if I can keep this site running until 2040, maybe I can even provide a form of career insurance if they struggle after college.

For now, I’m content not to maximize revenue because we already have enough. But if the day comes when my family needs me to earn more, I will. That responsibility as a father never goes away, even if the urgency to chase dollars does.

What are your thoughts on how being truly FIRE affects an entrepreneur’s path? Could it be that when you no longer need money to survive, you’re actually free to become a better entrepreneur because you can focus entirely on creating the best product possible? And do you find it strange when a FIRE influencer asks their audience for donations?

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If you own rental properties, this post may resonate with you. It’s about what to do with a property once a tenant gives notice: keep renting it out, sell and pay capital gains taxes, sell via a 1031 exchange to defer taxes, move back in to avoid taxes, or—most controversially—simply leave it empty.

For most of my career writing about real estate, I’ve focused on buying properties and building wealth. But as we get older, the question of when to simplify becomes just as important. John, a longtime reader, is facing this very crossroads. His situation offers a useful case study for anyone deciding whether to hold, rent, cash out, or landbank.

John’s Rental Property And Wealth Situation

John owns a San Francisco rental property that will be vacant on November 1, 2025, after his tenants gave notice. He bought the home years ago for $1.85 million and invested roughly $180,000 in upgrades. Today, he estimates it could sell for $2.7 million.

The good news is that the property is free and clear—no mortgage. However, carrying costs still add up. Property taxes alone are about 1.24% of a $2.3 million assessed value (~$25,000/year), and with insurance, utilities, and basic maintenance, total holding costs are around $30,000 a year.

The home currently rents for $8,200 a month, with market rent closer to $8,500, generating $102,000 a year in potential income. But John is tired of tenants and the stress that comes with managing rentals. John is strongly considering selling or leaving it empty. He believes his home will appreciate handsomely over the next decade due to the tech boom.

Further, John invested in several private AI companies during the pandemic that have since grown to roughly eight times their original combined value. More importantly, his seven-figure public stock portfolio is also up ~100% since January 1, 2020. So maximizing rental income is no longer a financial necessity for him.

The Four Main Options For The Rental Property

Although John can afford to leave his San Francisco rental property empty, he must first consider these four more optimal financial choices.

1) Rent It Out Again

John could re-tenant the property for $8,200 – $8,500 a month and continue collecting strong cash flow. The risk is that if he later decides to move back in or sell, tenants might still be in place—creating timing conflicts and potential headaches.

In 2028, John plans to relocate his family back to Charlottesville, Virginia, to be closer to his mother. Ideally, he’d like to sell all his rental properties before the move. But if the new tenants haven’t left by then, he’ll either have to become a long-distance landlord or hire a property manager.

2) Sell And Pay Capital Gains Taxes

John sold another property in July 2025, so he has already used his $500,000 tax-free primary residence exclusion until July 2027.

If he sells now, he faces about $500,000 in capital gains. At a combined 33.2% federal and California tax rate, plus ~5% in commissions and transfer costs (~$130,000), he estimates he’d owe around $300,000 in taxes and fees. A painful number, but one that would free up roughly $2.4–$2.5 million in net cash for other uses.

With Treasury bonds yielding over 4%, John longs for a simple, risk-free way to earn money. At the same time, he owns an ideal single-family home that can comfortably house a family of four or five in the heart of a new tech boom. Potentially missing out on another 30 – 40% in appreciation over the next decade may cause a lot of regret.

3) Sell Via a 1031 Exchange

A 1031 exchange would allow John to defer the taxes if he reinvests the proceeds into another rental property. But this strategy means buying a replacement property and continuing to deal with tenants—exactly what he’s trying to avoid.

4) Move Back In

By moving back into the property for at least two years, John could eventually sell it tax-free under the primary residence exclusion. Even though there’s no mortgage interest to deduct, the SALT cap deduction limit to $40,000 from $10,000 under the One Big Beautiful Bill Act should help reduce John’s taxes.

But moving back in would mean giving up the rental home his family currently enjoys. That said, the timing would work if he really plans to relocate back to Virginia in 2028. He has time to give his 45-day notice to his landlord and arrange for the movers.

The Temptation To Leave The Rental Empty

Now that we’ve covered the most sensible financial options for John’s rental property, let’s consider a fifth choice: leaving the property vacant.

With a healthy net worth and a comfortable income, John is tempted to keep the house as a “quiet asset,” free of tenants. This way, he has minimal headache and maximum flexibility on when to sell when he moves to Virginia.

The annual carrying cost of about $30,000 is manageable, but the opportunity cost of forgoing $102,000 in annual rent is significant.

With the AI tech boom, John is long-term bullish on San Francisco real estate. In 20 years, he believes the property will surely be more valuable than it is today. If mortgage rates continue to trend lower, he believes the pace of annual appreciation will surpass the property’s carrying costs.

How Wealthy Do You Need To Be To Comfortably Leave a Rental Empty?

John’s numbers provide a rare window into what it takes financially to luxuriously hold a high-value property with no cash flow. Here’s how to think about it, both for John and for any landlord weighing a similar decision.

1. Annual Carrying Costs vs. Net Worth

John’s holding cost of $30,000 a year is about 1.1% of the property’s $2.7 million value. Whether that’s “affordable” depends on what share of his total net worth it represents.

• At a $2 million net worth, $30,000 equals 1.5% of wealth—a noticeable bite.
• At a $5 million net worth, it’s 0.6%—easier to stomach.
• At a $10 million net worth, it’s just 0.3%—much easier to stomach.
• At a $20 million net worth, it’s just 0.15%—a rounding error that isn’t noticeable.

For most landlords, if the carrying cost is under 0.5% of total net worth, leaving a property vacant starts to feel like a lifestyle choice rather than a financial mistake. John can afford to wait months, if not years for the perfect tenant to come along and not cause him trouble.

John should also consider the lost income from not renting, along with the carrying costs. A similar calculation could be made to quantify the impact. However, since John has already decided he’d rather forgo the rent to avoid the hassle, that calculation is ultimately moot.

2. Carrying Costs vs. Passive Income

Another worthy metric is whether your passive income—dividends, bond interest, other rentals—can easily cover the cost.

• With $300,000 a year in passive income, $30,000 is only 10% of that income.
• With $60,000 a year, it’s 50%, which feels far riskier.

A helpful rule of thumb: if carrying costs are under 10% of passive income, you have the “luxury gap” to leave a property idle indefinitely.

3. Opportunity Cost: The Rent You’re Giving Up

Finally, weigh the lost rent. John’s property could fetch about $102,000 a year in rent.

• For a $2 million net worth, that’s a 5.1% yield—hard to ignore.
• For a $5 million net worth, it’s 2%—still meaningful.
• For a $10 million net worth, it’s about 1%—easier to justify if peace of mind matters more than incremental return.
• For a $20 million net worth, it’s about 0.5%—almost insignificant for the benefit of peace of mind.

Example Comfort Levels

Net Worth	Annual Carrying Cost ($30K) as % of Net Worth	Lost Rent ($100K) as % of Net Worth	Comfort Level
$2M	1.5%	5%	Tough unless income is very strong
$5M	0.6%	2%	Manageable if passive income covers it
$10M	0.3%	1%	Comfortable “luxury choice”

These ratios give any landlord a framework for deciding when leaving a property empty is a sensible trade-off for freedom and flexibility.

Lessons for Fellow Rental Property Investors

If you’re facing a similar crossroads, here are a few takeaways from John’s experience so far:

• Taxes Drive Timing. The IRS’s primary residence exclusion and 1031 exchange rules can save hundreds of thousands of dollars, but they dictate your calendar. Plan your sequence of sales early.
• Lifestyle Over IRR. A spreadsheet might tell you to hold for higher returns, but if a property causes stress or limits your freedom, selling can be the smarter long-term move.
• Simplicity Has Value. Carry costs on a vacant property may not break you, but they weigh on you over time, financially and mentally. The simpler your life is, the less of a desire you’ll have for selling a rental property.
• 1031 Exchanges Are Powerful but Binding. They’re great for investors committed to real estate, but they don’t fit well if your goal is to downsize or exit the landlord role.

Final Thoughts

John admits that paying about $300,000 in taxes and fees to sell when he could simply rent or hold feels extreme. He could hold onto the property until death so his kids could benefit from the step-up in cost basis and pay no taxes. At the same time, selling would simplify his life and bring him one step closer to his goal of relocating to Charlottesville to care for his mom.

For other landlords, the takeaway is clear: if your carrying costs and lost rent are a small fraction of your net worth and passive income, you may one day earn the rare privilege of keeping a property empty purely for peace of mind.

But if those numbers still feel significant, the math will likely push you toward either renting for income, selling for liquidity, or exchanging for a more strategic property.

Readers, What Would You Do?

If you were in John’s shoes, which path would you choose?

• Rent it out for $8,500 a month and keep the income stream alive?
• Sell now and pay the taxes and commission for a cleaner, simpler life for the next two years?
• Move back in to reset the primary residence exclusion clock, but go through an inconvenience and lifestyle downgrade?
• Execute a 1031 exchange to defer taxes but stay in the landlord game?
• Leave it empty and just pay the carrying costs for simplicity given his high income and net worth.

I’d love to hear your thoughts! Have you ever considered leaving a rental vacant even when you could rent it for strong income? At what wealth or income level would you feel comfortable doing so? John’s case shows that while financial freedom creates options, every option carries its own trade-offs.

Suggestions To Build More Passive Wealth

Invest in real estate without the burden of a mortgage or maintenance with Fundrise. With over $3 billion in assets under management and 350,000+ investors, Fundrise specializes in residential and industrial real estate. The wealthier you get, the more you’ll want to earn passive real estate returns and not bother with tenants.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. You can also get my posts in your e-mail inbox as soon as they come out by signing up here.

Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

To celebrate Millionaire Milestones: Simple Steps To Seven Figures making the USA TODAY national bestseller list, I want to share how you might feel and what you might do as you hit various levels of wealth. Perhaps by sharing, I’ll motivate you to save and invest more aggressively. We’ll start with reaching your first million, then move on to $5 million, $10 million, and $20 million.

I stop at $20 million because once you surpass that threshold, there’s not much left you can spend money on to meaningfully improve your lifestyle. Beyond $20 million, building more wealth simply becomes a game, a personal challenge, or an exercise in greed.

As the Chinese philosopher Lao Tzu once said, “A journey of a thousand miles begins with a single step.” When it comes to building wealth, you must be intentional. Treat managing your finances with the same passion and precision you give to your favorite hobby.

Those who wing it will wake up a decade from now wondering where all their money went. But those who stay intentional—reviewing their finances regularly and investing in their financial education—will build lasting wealth. More importantly, they’ll unlock the freedom to live life boldly, on their own terms.

1. Reaching Your First Million: Relief, Validation, and a Sense of Real Possibility

When you hit your first million dollars, you’ll feel an overwhelming sense of relief first and foremost. You’ll think to yourself, “Finally, all those years of saving, investing, and grinding have actually amounted to something tangible.” It’s a huge milestone you should be proud of.

It’s like crossing the finish line of a marathon where the prize isn’t just a medal, it’s the ability to breathe a little easier. You won’t necessarily feel rich, especially thanks to inflation, but you will feel validated. You’ll realize that as an employee, building wealth is not just for other people or institutions, it’s for you, too.

Your first million will also give you a huge psychological unlock. Suddenly, you’ll see possibilities everywhere. The fear of financial ruin won’t vanish, but it will shrink given you’ll be able to generate $40,000 – $45,000 a year in passive income, risk-free at today’s interest rates. You’ll start to imagine what life might look like if you really ramp things up.

Most importantly, the first million is where you internalize a crucial truth: the snowball gets bigger on its own. Saving that first $250,000, as I write in my book, might have felt like climbing Everest. But once you have $1 million compounding at 5%–10% a year, you’re talking about $50,000–$100,000 a year in passive growth without lifting a finger.

You can aggressively play offense now, not just prevent defense. You can afford to take more risks, something I wish I did more of when I was younger.

Common Pitfalls Getting to $1 Million:

• Lifestyle creep: As income rises, spending rises even faster for the undisciplined.
• Investment FOMO: Chasing the next hot trend (and blowing your finances up) instead of sticking to a plan.
• Quitting too early: Giving up on saving or investing because the early gains seem too small.

2. Reaching The $5 Million Milestone: Confidence, Options, and a Taste of True Freedom

Once you reach the $5 million milestone, a quiet but profound confidence starts to settle in. You no longer have to calculate whether you can afford the organic blueberries at Whole Foods. A $7,000 unexpected home repair or even a $50,000 investment mistake that plummets 20% soon after no longer feels like a big deal.

You also start to realize you have options. A $5 million net worth can throw off $150,000–$300,000 a year in passive income, depending on how it’s invested. That’s enough to exceed the median American household’s entire pre-tax income of ~$80,000 without working another day in your life.

If you’ve been stuck in a soul-sucking job or run a business that gives you ulcers, $5 million lets you walk away. But of course, try and negotiate a severance package so you have an even greater financial cushion when you do. If you’ve been dreaming of living abroad, working part-time, or starting your own business, $5 million gives you the luxury of choice.

Unfortunately, you’ll still worry about your finances.What if the stock market crashes? What if rental income dries up? What if health care costs explode? But you will rationally make contingency plans if any of these things happen.

Overall, your anxiety will diminish because you know you have true staying power. In a previous Financial Samurai poll, $5 million was the ideal net worth to retire with, followed by $10 million. You are set for life if you remain vigilant with your finances.

What Happened To The $3 Million Net Worth Milestone?

Some readers have asked why I skip the $3 million milestone, given the jump from $1 million to $5 million is large. I agree it’s a notable step.

Hitting $3 million is a solid financial feat—it can free you from a bad job or open new doors—but it doesn’t feel much different from $1-$2 million. I chose to highlight $5 million because that’s when the sense of freedom and financial security starts to feel exciting again, much like hitting your first million.

Common Pitfalls Getting to $5 Million:

• Overleverage: Taking on too much debt or trading on margin thinking it’s a shortcut.
• Burnout: Pushing too hard at the expense of health, family, and happiness.
• Status signaling: Overspending on cars, homes, watches, and jewelry to “show” you’ve made it. It’s interesting, but some of the most insecure people I’ve met are also those with net worths close to the $5 million mark.

Here’s a fun clip from one of my favorite TV shows, Succession, which pokes fun at how $5 million is barely enough if you live in an expensive city like New York. You may not feel rich with $5 million in NYC, SF, LA, Seattle, or Boston, but you should feel comfortable enough.

Looking Back At Retiring With $3 Million In 2012

I left my banking job at age 34 with a net worth of approximately $3 million. Adjusted for a 4% compound annual inflation rate, that’s about $5 million in today’s dollars.

At the time, $3 million felt like enough because I only had myself, and eventually, my wife to take care of. My investments were generating around $80,000 a year in passive and semi-passive income. Combined with a severance package and the support of my wife—who was 31 then and willing to work for another three years—I felt it was time to peace out.

Still, I was nervous and insecure about leaving my day job so young. Looking back, I probably should have worked for another three-to-five years to further solidify my finances. With $3 million, I was much more argumentative in the comments section too. Now I’m not.

That said, everything has worked out because I found purpose. I found something I love to do that generates supplemental retirement income, and, more importantly, I became a father. In the end, retiring early gave me the flexibility to build a more meaningful and fulfilling life.

3. Reaching The $10 Million Milestone: Abundance, Status, and Subtle Shifts in Relationships

At the $10 million milestone, your world view may shift again. Scarcity thinking—the nagging belief that there’s never enough—starts to dissolve, but never truly goes away.

With $10 million, you’ll feel an underlying abundance mindset take over:

• You can generously tip service workers without thinking twice.
• You can say yes to experiences you once would have passed up because of cost.
• You can invest in your health, relationships, and personal growth without financial hesitation.
• You can eat wagyu steaks and toro sashimi until you’re sick of them both.
• You’re part of the richest rich class who didn’t get rich through index funds
• Upgrading to Economy Plus or even first class is no problem
• People don’t piss you off as much anymore
• You can more easily migrate to another country to save on taxes
• Perhaps best of all, you can easily speak your mind and stand up for yourself without fear of financial ruin

Being A Multi-Millionaire Can Have Its Problems

At this level, status becomes more visible, whether you like it or not. People may treat you differently once they know—or sense—your wealth. Friends and family might ask you for favors, loans, or business investments. You’ll need to develop a thicker skin and clear boundaries.

With $10 million, you’ll probably embrace Stealth Wealth like a secret agent trapped behind enemy lines. You didn’t spend all these years building your fortune just to get hit up for handouts, judged, or peppered with investment pitches every time you leave the house or turn on your laptop.

As a millionaire ten times over, people will be quicker to judge your actions and far less sympathetic when you’re feeling down. Even though millionaires need love too, people may simply not care if you’re feeling down and out. Hence, you purposefully become more guarded with your friends and acquaintances.

Thankfully, some of your relationships will deepen. You’ll naturally gravitate toward people who genuinely don’t care about your money.

No longer will you feel the need to maintain relationships just because someone holds sway over your financial or career future. Instead, you’ll start surrounding yourself only with people you truly enjoy being around. Say goodbye to toxic relationships!

Having A $10 Million Net Worth And Children

If you have children, reaching $10 million also changes how you think about legacy. How do you empower your kids without spoiling them? How do you prepare them for a world where they don’t have to struggle financially the way you did?

Fat FIRE parents might worry even more because they no longer have traditional day jobs that force them into the office 40+ hours a week. At least if you have a day job and a $10 million net worth, your children will know that you are working hard.

As a result, FIRE parents will likely have to make up a “trust fund job” to demonstrate their work ethic and purpose to their kids. Otherwise, they might ruin their perspective on life and money.

At the same time, with so much wealth, you may naturally start toying with the idea of making your kids millionaires too. You know firsthand how hard it was to get here, so it’s only natural to look for ways to help them shortcut the journey.

Just be careful. Taking away your children’s drive to become financially independent could end up being one of the greatest disservices you do for them. As you know, one of the greatest feelings is achieving something mostly on your own.

Common Pitfalls Getting to $10 Million:

• Neglecting tax efficiency: At higher wealth levels, minimizing taxes becomes just as important as investing well.
• Poor estate planning: Without smart legal structures, you risk losing millions to taxes or probate.
• Not cashing out or diversifying into safer assets: Outsized income and company valuations do not last forever. Without diversification, your net worth swings can be huge.

4. Reaching The $20 Million Milestone: Peace, Purpose, and a Reduction In Material Desires

Crossing into $20 million territory feels less like a major “event” and more like an arrival. You realize there’s almost nothing left to buy that will materially improve your happiness.

A $50,000 watch won’t make you feel better than a $500 one, so you don’t get one. A $200,000 car won’t make you happier than a $50,000 one, so you drive your current car until it breaks. You could buy a third or fourth home, but would you even have time to enjoy them? You can’t because you can only live in one place at a time.

The only real splurges you can enjoy with a $20+ million net worth are flying private, renting vacation homes for $50,000+ a month, and paying for $60,000+/year private grade school without worry. You could do these things with “only” a $10 million net worth too, but you’ll feel the expenses more acutely.

But even with $20 million, will you really be willing to spend $120,000 on a roundtrip private jet flight from San Francisco to Honolulu when four first-class seats cost just $10,000? Probably not. The more disciplined you are with your personal finances, the less likely you’ll be to splurge on such unnecessary luxuries.

You might also finally feel like you’ve won the lottery, as you could easily generate $1 million a year in almost risk-free income for the rest of your life. The happiest people with this type of outsized wealth recognize their luck and never forget it.

You start thinking about legacy in a more profound way:

At the $20 million milestone, the real luxury becomes time, health, and relationships.

• How can I make an impact beyond myself?
• Who can I help with this abundance?
• What institutions or causes will outlive me?
• Will my children grow up to be outstanding citizens who make something of themselves?

Ironically, at $20 million, if you’re not careful, you risk losing your edge. The hunger that fueled you to work harder, save more, and invest smarter might start to fade. That’s why having a purpose beyond money becomes so crucial.

In addition, once money is no longer a problem, all your other problems come into sharper focus. Neglected your spouse and children on your path to multi-millionaire status? That regret may now feel overwhelming as you can’t get that time back. Prioritized your career at the expense of your health? Suddenly, nothing seems more important than getting fit so you can live longer now that you’ve won the lottery.

If you ever reach this level of wealth, never voluntarily reveal how much you have. Let others guess, but never confirm. Instead, throw them off the scent by looking and acting as normal as possible. Your health, happiness, and safety depend on staying humble and low-key. If you must share something, let it be your generosity.

Your Financial Worry Might Actually Rebound

Ironically, reaching higher levels of wealth can bring back financial anxiety. The more you have, the more there is to lose. A 20% decline could erase $4 million to $16 million. It’s a gut-wrenching amount, even if you’re still financially secure. That’s why your mindset naturally shifts toward capital preservation, all while trying to stay ahead of inflation.

One reason real estate and private investments become more appealing is that you don’t see the daily price swings like you do with public stocks. With your money locked up for 5 to 10 years, you’re less exposed to the emotional rollercoaster of market volatility. As a result, you are more likely to feel at ease.

If you’re looking to diversify your real estate investments and generate more passive income, check out Fundrise, my preferred private real estate and venture capital platform. Fundrise manages around $3 billion in assets for over 380,000 investors. I’ve personally invested over $300,000 in their commercial real estate and venture capital offerings. They’ve also been a long-time sponsor of Financial Samurai.

At this stage, the real battles are psychological. You may find yourself wrestling with how you should feel about having outsized wealth. How dare you feel sad or ungrateful, but you sometimes do. Guilt is an emotion that sometimes emerges as you wonder why you?

In time, you might even downplay your financial success, convincing yourself you’re not as rich—or as lucky—as you truly are.

Common Pitfalls Getting to $20 Million:

• Losing your drive: Without new goals, it’s easy to plateau since nobody needs more than $20 million.
• Isolation: Wealth can unintentionally distance you from old friends and even family. Stay grounded, unless you proactively seek out friends who also have a similar level of wealth.
• Might get trapped in a bubble: Your expectations for how to spend, earn, and think about money can run completely counter to the 99.5% of the American population who have less.

Wealth Is Built on Thousands of Micro-Decisions

Each millionaire milestone you reach brings a sense of satisfaction. But it’s the $3 million, $5 million, $10 million, and $20 million marks that tend to feel the most significant.

None of these feelings—relief, confidence, abundance, joy, or peace—happen by accident. They happen because you took thousands of intentional steps over years, sometimes decades.

Remember:

• Every $100 you invest instead of spend
• Every hour you spend learning and creating instead of mindlessly consuming
• Every risk you take to level up your skills or career

It all adds up.

Time To Focus

Building wealth is a straightforward formula, but sticking with it takes resilience. Inflation will keep shifting the targets, and today’s milestones may look modest in thirty years.

But with enough discipline, patience, and purpose, you can achieve more than you ever imagined. The real reward is not just reaching a number, but growing through the process—learning, adapting, and gaining the confidence that comes from doing the work.

If you want to create a life of freedom for yourself and your children, take the first step today. You may find that the journey itself becomes the greatest part of all.

The Next Million Dollar Windfall: Investing In AI

One of the ways I plan to make another million dollars is by investing in private AI companies. Since private companies are staying private for longer, more of the gains are accruing to early, private investors. It only makes sense to allocate more capital to this space.

I believe artificial intelligence will significantly disrupt the labor market in the future, potentially making it harder for my kids to find fulfilling careers. To hedge against this possibility, I’m investing in both private and public AI companies. That way, if AI does end up reshaping the job landscape over the next 20 years, our AI investments could perform exceptionally well.

Check out Fundrise Venture, an open-ended product accessible to all. It invests in the following five sectors:

• Artificial Intelligence & Machine Learning
• Modern Data Infrastructure
• Development Operations (DevOps)
• Financial Technology (FinTech)
• Real Estate & Property Technology (PropTech)

Roughly 85% of Fundrise Venture is invested in artificial intelligence in some capacity. In 20 years, I don’t want my kids wondering why I didn’t invest in AI or work in AI!

The investment minimum is also only $10, making it accessible and easy to dollar-cost average in. Most venture capital funds have a $250,000+ minimum. You can see what Fundrise is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

I’ve invested $253,000 in Fundrise venture so far, and plan to keep investing until I build a $500,000 position to hopefully make another $1+ million return within 10 years. There are obviously no guaranteed returns when it comes to risk assets, so invest according to your risk tolerance and goals. Fundrise is a long-time sponsor of Financial Samurai. Our investment philosophies are aligned. 

Pick Up A Copy Of Millionaire Milestones Today

As I wrote in my USA TODAY national bestseller, Millionaire Milestones: Simple Steps To Seven Figures, “If the direction is correct, sooner or later you will get there.” Make sure you have the right resources to point you in the right direction.

Good luck on your financial journey. If you want to become a millionaire or multi-millionaire, my book will help you get there. You can pick up a copy on Amazon, which has the best sale.

For those of you who’ve reached these millionaire milestones, how did you feel after hitting each one? Which financial milestone had the most lasting impact on your lifestyle and happiness? I’d love to hear your story—what changed for you, and what did you do differently afterward?

Subscribe To Financial Samurai 

Listen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Your shares, ratings, and reviews are appreciated.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

How You’ll Feel Reaching Various Millionaire Milestones ($1-$20M) is a Financial Samurai original post. All rights reserved.

After a week of reviewing the tax-free exclusion rule for selling a rental property, I decided not to sell. I’d already used my $500,000 tax-free exclusion amount and would need to wait at least two more years before I could potentially use the full amount again. Most importantly, I’m on a mission to boost my passive income and return to being 100% financially independent.

If you want to grow your passive income to the point where you’re truly free, you’ll need two things: relentless optimization and a willingness to sacrifice. The good news? If you commit fully to the mission, I believe anyone can get there.

Let me share what I’m giving up in the name of financial freedom. Deciding not to sell the property was relatively easy, given the tax consequences and my long-term optimism about San Francisco real estate. But choosing to rent out my downstairs sanctuary—that was the hard part.

Since January 2020, the downstairs unit of my rental house had been my all-in-one retreat. A place to:

• Escape for a few hours to write in peace.
• Host visiting friends and family long-term.
• Give the kids a change of scenery to play
• Enjoy moments of bliss in the hot tub.

During the early pandemic years, this space was my survival tactic. Three times a week, I’d take my son down there for two to three hours so my wife — and later, our baby daughter — could nap without interruption.

When my daughter turned 2½ in mid-2022, I started taking both kids. It was perfect: they could draw at the table, run around on the deck, and then jump into the hot tub to burn off more energy. I would then give them both showers, making bedtime routine easier for my wife and me.

If anyone asks me the single best material thing I’ve ever bought, I answer without hesitation: my $15,500 hot tub (includes installation). A close second? Toto Washlets. Once you have both, you can’t go back.

Why Give Up the Best Thing Ever?

I had a decision to make. Continue renting out only the upstairs portion of the single-family home while keeping the downstairs sanctuary, or rent out the entire house and lose access.

For more than six years, that hot tub gave us joy. I wrote in it through voice dictation. We played in it. I recovered from workouts in it.

So why would I give it up? Because my mission to rebuild our passive income to cover 110% of our desired living expenses by December 31, 2027 outweighs even my love for a hot soak. With my Provider’s Clock ticking loudly, leaving such a valuable space unrented started to feel like financial negligence.

With housing, tuition, and healthcare costs climbing—and A.I. putting downward pressure on wages and jobs—keeping this luxury was no longer viable. As a parent, I have to balance my family’s financial security with my desire for freedom.

Mission: Regain $150,000 in Lost Passive Income

At the end of 2023, I bought a house I didn’t need. It was a dream home — better layout, better location, the works. But it came at a price: my passive income dropped by $150,000 a year, and my “financially free since 2012” status was officially revoked.

That first half-year of being house-rich and cash-poor was rough. I had disaster scenarios constantly running in my head — trees crashing through the roof, wildfires sweeping through, a giant sinkhole swallowing the yard. I hadn’t felt this much financial stress since the first six months after I left my finance job in 2012.

The only thing that eased my anxiety? Taking action by saving and earning as much money as possible! Every month that went by with no calamities and increased cash in the bank improved my mood.

I set a goal: restore the lost $150,000 by December 31, 2027. And when I set a financial goal, I don’t let up until it’s met.

Most Obvious Action: Monetize Old Assets

I started by renting out my old house, which recouped ~$70,000 in semi-passive income after expenses. That worked for a year before I sold it in spring 2025, reinvesting the proceeds into stocks, Treasury bonds, and venture capital.

That portfolio performed better than expected, partly because I had cash ready to buy the dip during March and April’s market pullback. I started buying a month too soon, but the stock market eventually recovered. But I still had a passive income gap to close of about $60,000. Over the past two years, I’ve been able to generate about $20,000 in new passive income from saving and investing.

Which led me back to the sanctuary decision:

• Option 1: Rent just the upstairs (2/1 unit) for potentially $4,500/month (up from $4,000/month) — about $6,000 more per year than the old rent.
• Option 2: Rent the whole house for potentially $6,800/month — about $33,600 more per year. I wasn’t sure I could get $6,800 a month, but that’s what I guessed based on market research.

Given I was about $60,000 shy of recouping the lost $150,000 in passive income, Option 2 closed the gap by a significant 56%. But it meant giving up my sanctuary and hot tub, entirely.

Testing the Rental Market

Initially, my existing tenants asked if they could rent just the downstairs for 1–3 months. They were having a baby and wanted space for visiting family. Even though it was my private sanctuary, I wanted to accommodate so their parents and in-laws could easily come visit. I checked comps on Craigslist. Similar properties were listed for $6,800–$7,100/month, but they’d been listed for several weeks, so I wasn’t sure whether that was the true market clearing price.

I offered them a discount at $6,500/month for the whole place, fully furnished downstairs. They’d get one extra bedroom, an office that could also be used as a bedroom, a mini-fridge, a desk, a day bed, a king size bed, two side tables, and a large deck facing the ocean.

Somewhat surprisingly, they passed. I figured the convenience and discount made it a great short-term solution. But while I was in Honolulu for five weeks, they found something cheaper down south.

No hard feelings, as I think it’s great they found a single-family home they could comfortably afford. It also freed me to test the full rental market without half-measures. Without automatic rent adjustments, the discount to market grows wider over time.

A Pleasant Surprise: A Rental Property Bidding War

When I got back from Hawaii, I listed the house on Craigslist for $7,350/month (a bump from my initial $6,800 estimate). Listing was free, and I hadn’t tested demand in a year, so why not? My house looked nicer than the comps at $7,100/month since it was gut remodeled for us to use. And if I got no demand, I could always lower the price.

The response floored me:

• 3 inquiries in 24 hours
• 8 inquiries by Saturday (four days after first posting)
• 2 private showings that morning — both wanted it immediately

With demand that strong, it seemed I had made a mistake. So I asked for best offers. My favorite prospect came back at $7,500/month with three months’ rent upfront. Done.

Could I have gotten $7,800? Maybe as some poker dads I was discussing with said $7,500 still sounded cheap. But I wanted a deal that felt fair for both sides. I decided to pass on collecting three months rent up front as a show of good faith.

Overall, I found great tenants and had them sign the lease in just one week. Now I’ve got to hope for the best.

Significant Passive Income Progress Through Optimization

Just like that, I boost my projected annual passive income by ~$42,000, leaving me only $18,000 short of my 2027 target. I had optimized an underutilized asset.

For perspective, generating an extra $42,000 a year at a 4% yield would require an additional $1,050,000 in investments. As dual unemployed parents (DUPs), there’s no realistic way to earn that kind of money through sheer effort alone. And writing a book every 2-3 years isn’t close to enough.

The only viable path is to grow our portfolio through market returns and then rebalance those gains into income-producing assets. Relying on luck, then triggering unnecessary capital gains taxes, is not a reliable strategy for building more passive income.

Why the Sanctuary Mattered Less

One of the biggest epiphanies after purchasing a larger home was how much easier it became to host guests. Because my new home has multiple en suite bathrooms, hosting my parents for eight days—each staying in their own bedroom—was a breeze.

On another visit by my parents, I even hosted my sister at the same time. Seven people in one house with nobody getting on each other’s nerves was impressive!

This realization changed my perspective on keeping the sanctuary. One of my main reasons for holding onto it was to have a place for guests, especially during COVID. If a caretaker got sick, they could also go there to quarantine. But now that my primary residence could comfortably accommodate family and friends, and COVID is long over, that reason no longer held as much weight.

By renting out the sanctuary as well, I could optimize spending more time playing with the children at home. We’re slowly transforming our two-car garage into a multi-purpose play space for arts, crafts, and games. We’re also creating more fun activities to do in our enclosed yard. This is a further optimization of resources.

In a real way, buying a nicer home has nudged me toward boosting passive income by being willing to rent out the entire sanctuary instead of just part of it. This shift means the actual cost of owning our more expensive primary residence isn’t as high as I had originally anticipated.

Replacing the Hot Tub (Eventually)

I’m already planning a way to build a cement platform and add a new hot tub at our current place. The electrical setup will be tricky, but I think I can make it work. I just need to remember the process of what to install first, and test out the ampage.

Until then, the kids and I can visit the Bay Club in Redwood City once or twice a month. At $180/month plus $20 guest passes, it’s cheaper than operating a hot tub. In addition, members get access to multiple Bay Clubs in the Bay Area where I get to play pickleball or tennis, which is especially beneficial when it rains due to one cub having indoor courts.

Being a member of a private sporting club is a great return on lifestyle investment. With no more hot tub, I’m more incentivized to utilize my membership. This is another form of optimization given I go only once every 10 days on average. Now I will realistically go twice a week and maybe even start lifting weights.

Sacrifices for Passive Income: It’s Not Just About Spending Less

Here’s the thing. Passive income growth isn’t only about cutting expenses and investing more. It’s about opportunity cost. Sometimes you have to give up something you love now so you can afford more of it later.

Some ways to accelerate the process:

1. Maximize asset yield: Just like I rented the whole house instead of part, look at ways to squeeze more income from what you already own.
2. Side hustles as seed capital: Use short-term work (consulting, tutoring, freelance projects) to create cash you can reinvest.
3. Reinvest windfalls: Tax refunds, bonuses, one-off gains, private real estate distributions, should go into income-producing assets, not lifestyle inflation.
4. Periodic portfolio review: Rotate out of underperforming or low-yield assets into better ones. Speaking to a financial professional can help you make better asset allocation decisions as you will have blindspots.
5. Short-term sacrifice for long-term abundance: The sanctuary was a comfort, but the math showed it was a luxury I could monetize.

Alternative Passive Income Boost Ideas

If you’re chasing your own passive income target and don’t have a “sanctuary” to rent out, here are some other strategies worth exploring:

• House hacking: Rent out a spare bedroom, ADU, or even your driveway for RV or boat storage.
• Online real estate investing: Own a slice of real estate without the headaches of being a landlord. Public REITs often yield 3–6% and can be bought in small increments. Private real estate funds can also generate equal or higher returns without the visible volatility. You just won’t have as much leverage.
• High-yield savings and CDs: Not glamorous, but risk-free yields north of 4% can meaningfully close smaller gaps.
• Private credit and venture debt: Higher yields, but with more risk.
• Dividend stocks: Buy businesses that increase payouts yearly. Even a modest 2–3% yield can snowball if dividends grow 5–10% annually.
• Short-term rental arbitrage: Lease a property long-term, furnish it, and rent it on Airbnb. Higher potential yield if managed well. This requires a lot of work, so I’m not a fan.
• Licensing or royalty income: From books, courses, photography, or music you’ve created. The upfront work pays off for years.
• Peer-to-peer lending: Riskier, but can yield 6–10% if you diversify across many borrowers.

The key is to match your strategy to your comfort with risk, your available capital, and the time you’re willing to spend managing it. Here’s a more comprehensive host where I rank the best passive income investments.

Sacrifice Now, Soak Later

Giving up the sanctuary and hot tub stings. I actually feel a little melancholy, as I always do when one chapter of my life is over. It was such a wonderful place that I will miss. But the short-term sacrifice brings me closer to a long-term life where I can have more freedom.

Sacrifice now. Soak later. That’s what earning passive income is all about, if you really want it.

Readers, what are some things you’ve had to sacrifice in order to generate more passive income for financial freedom? Have you been able to optimize any of your assets to boost your investment income?

Subscribe To Financial Samurai 

Pick up a copy of my USA TODAY national bestseller, Millionaire Milestones: Simple Steps to Seven Figures. I’ve distilled over 30 years of financial experience to help you build more wealth than 94% of the population—and break free sooner.

Listen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Your shares, ratings, and reviews are appreciated.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

AGNC Investment (AGNC -0.53%) pays a prodigious monthly dividend with a yield over 15%. That’s more than 10 times higher than the S&P 500.

While the mortgage real estate investment trust (REIT) offers a high-yielding payout, it hasn’t increased its dividend since its first few quarters as a public company more than 15 years ago. Instead, it has cut its payout several times over the years. Because of that, it’s not an ideal passive income stock for those seeking a bankable income stream.

Those desiring to generate durable and growing passive income should consider Main Street Capital (MAIN 1.19%) instead. The business development company (BDC) has routinely raised its high-yielding monthly dividend. It also periodically pays quarterly supplemental dividends. Here’s a closer look at this passive income machine.

Cashing in on interest income

AGNC Investment and Main Street Capital share several commonalities. They primarily invest in secured loans that generate interest income.

AGNC Investment invests solely in mortgage-backed securities (MBS) protected from credit risk by government agencies like Fannie Mae. Those residential mortgage pools tend to be very low-risk investments that have low returns (low- to mid-single-digit yields). AGNC boosts its returns (and risk profile) by investing in MBS on a leveraged basis.

Main Street Capital provides capital solutions (private debt and private equity) to lower middle market companies (those with revenues between $10 million and $150 million). It also provides debt capital to middle-market companies (those with revenues above $150 million). While these investments have higher risk profiles, they also provide much higher returns (its lower middle market portfolio has a weighted average effective yield of 12.7%). It also makes equity investments, which provide it with dividend income and upside potential as the value of those companies increases.

The BDC takes several steps to limit its risk. It primarily invests in loans with a first lien position backed by collateral. That gives it priority of repayment should one of its portfolio companies file for bankruptcy. Main Street Capital also has a very strong financial profile, including an investment-grade credit rating and a low dividend payout ratio for its monthly dividend payment.

Superior performance

Main Street Capital’s conservative approach has served its investors well over the years. The company has never cut its monthly dividend rate since its initial public offering in 2007. Instead, the company has routinely raised its dividend. It has increased its payout by 132% over the years. Main Street has also periodically paid supplemental dividends since 2013, including the past 15 quarters in a row.

For comparison, 25 BDCs (78% of its peer group) have cut their dividend at least once since 2007 or their IPO date. Of that group, 16 BDCs (50% of its peers) have reduced their dividends multiple times. AGNC Investment has also cut its dividend several times since its IPO in mid-2008.

Main Street Capital’s ability to pay a growing dividend has contributed to its much higher total returns over the years:

AGNC Total Return Level data by YCharts

As that chart shows, AGNC Investment’s stock price has lost 50% of its value since its IPO. While the mortgage REIT’s lucrative dividend payment has helped boost its total return to over 10% annually, investors need to factor in some value loss when considering the company’s monster dividend. On the other hand, Main Street Capital’s stock price has increased by nearly 10% annually, contributing to its higher total return.

One factor driving Main Street Capital’s rising stock price is its equity investments, which have increased in value over the years, creating additional value for its shareholders. With its stock price rising, the company can sell additional shares to fund new investments without significantly diluting its existing investors. AGNC often needs to sell its stock at a lower price to fund new investments, diluting value for its existing investors.

Prodigious passive income plus upside potential

AGNC Investment offers a monster monthly dividend. The problem with the REIT is that the payout hasn’t grown and could get cut again. Because of that, its total returns could be less than its current income yield over the long term.

That’s why investors who are intrigued by AGNC should consider Main Street Capital. The BDC pays an attractive and growing monthly dividend that it supplements with additional quarterly payouts (8% total yield based on its last payment). The rising income stream, combined with the value growth of its equity portfolio, has enabled the company to generate higher total returns over the long term. That makes it a potentially better long-term option for investors seeking to collect passive income.

Matt DiLallo has positions in Main Street Capital. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Ever since I left my day job in 2012, I’ve used a form of the dumbbell investing strategy to grow my wealth while protecting against large losses. It’s a framework that’s helped me stay invested during uncertain times—especially when I felt the urge to hoard cash or sit on the sidelines.

If you’re in a situation where you know you should take some risk, but you’re also worried about losing money, the dumbbell investing strategy is worth considering.

What Is the Dumbbell Investing Strategy?

The dumbbell investing strategy involves allocating a roughly equal portion of your investable assets into high-risk, high-reward investments on one end, and low-risk, capital-preserving investments on the other.

If you’re operating with a 50/50 risk split—like I suggest in my post about when to stop taking excess risk—you’re already applying a version of the strategy. It’s especially useful when you’re uncertain about the macroeconomic environment or your personal financial situation.

Why I First Embraced the Dumbbell Strategy

The most uncertain times in my life were:

• Graduating from college without a written job offer in finance (came a month later while I was traveling in Japan)
• Leaving my career at 34 and wondering whether I had made a huge mistake betting on myself
• Becoming a father in 2017 and questioning whether our passive income was truly enough to keep up with inflation

Each time, I wanted to invest in my future and my family’s, but fear of loss made me hesitate. That’s why I turned to the dumbbell investing strategy after I retired and became a father. It gave me the psychological permission I needed to take action. Because the longer you sit on the sidelines avoiding risk, the more likely you are to fall behind.

Note: When I started working at Goldman Sachs in July 1999, I felt like I had won the lottery and decided to invest 100% of my savings into stocks. With strong income potential and modest expenses, going risk-on seemed appropriate. But I quickly received a rude awakening when the dot-com bubble began to burst on March 10, 2000. The NASDAQ would bottom on October 9, 2002, down 78%, and it wouldn’t fully recover until April 24, 2015—a long 15-year wait just to get back to even.

Why I’m Deploying the Dumbbell Strategy Again in 2025

Today, I’m more financially secure than in the past. But I’m also a lifelong investor, and right now the market gives me pause. Between tariffs, new legislation, stretched valuations, elevated interest rates, and AI hype cycles, I’m not rushing to load up on the S&P 500 at 22X forward earnings.

Still, I believe in dollar-cost averaging and that the market will be higher over time. But when uncertainty is high, the temptation to hoard cash increases. The problem? By the time certainty returns, the easy gains have often already been made.

Take the March–April 2025 tariff-induced selloff. If you waited for resolution, instead of buying the dip during the period of most uncertainty, you would’ve missed out on a 20%+ rebound. The best returns tend to go to those who act when others are frozen.

This is why, rather than stop investing, I’m leaning on the dumbbell strategy again.

The Conservative End of My Dumbbell

As the person responsible for our family’s financial well-being, I feel constant pressure to deliver a good-enough lifestyle, if not a great lifestyle. Every dollar saved or invested in risk-free income is a step closer to peace of mind.

My ultimate goal is to generate $380,000 in gross passive income a year, up from about $320,000 currently. That $60,000 gap is what I’m methodically trying to close by the end of 2027. Once achieved, I will deem us financially independent once more.

With Treasury yields still above 4%, I saw an opportunity to lock in solid returns with no risk. So I deployed capital into a mix of short-term and longer-duration government bonds.

On one end of my dumbbell, I purchased:

• $100,993.74 in 3-month Treasury bills yielding ~4.4%
• These will mature soon, and I’ll continue to roll them into similar duration or longer-term bonds, depending on interest rate trends

Over the next 12 months, this position alone will generate roughly $4,400 in risk-free passive income, reducing my annual deficit to about $53,600. Passive income progress feels wonderful!

The Aggressive End Of My Dumbbell

Now that I’ve shored up the conservative end of my dumbbell investing strategy, it’s time to swing to the aggressive side.

I could simply invest another $100,000 into the S&P 500, which I normally allocate around 70% of my public equity exposure to. But the S&P 500 feels expensive today, and I’m already heavily invested. Instead, I want to put capital toward what I’m both most interested in—and most concerned about: artificial intelligence.

AI is already disrupting the job market, and my biggest worry is that it will make spending a fortune on college an increasingly poor financial decision. Entry-level jobs are at the highest risk of being automated or eliminated. As a parent of two young children (8 and 5), this concern weighs heavily on my mind.

To hedge against a potentially difficult employment future for them, I feel it’s imperative to invest in the very technology that might harm their prospects. Ideally, they’ll learn how to harness AI to boost their productivity, or even join an AI company and build wealth of their own. But those outcomes are uncertain.

What I can do now is invest directly in the AI revolution on their behalf.

Investing In Artificial Intelligence

As a result, I’ve invested another $100,000 in Fundrise Venture, which holds positions in leading AI companies such as OpenAI, Anthropic, Databricks, and Anduril. If AI ends up eating the world, I want to make sure they have a seat at the table—at least financially. I’m also investing additional capital through closed-end venture capital funds as they call capital.

My hope is that owning a basket of private AI companies will compound at a much faster rate than the S&P 500, given these companies are growing much faster. But of course, there are no guarantees.

The Dumbbell Investment Strategy Is Best for Deploying New Cash

The dumbbell investing strategy made it easy for me to reinvest a little over $200,000 in cash from my home sale. Allocating $100,000 into T-bills gives me peace of mind that, no matter how bad the economy or markets get, at least half of my investment is completely safe and earning risk-free interest.

Meanwhile, if AI mania continues, I have $100,000 positioned to ride the wave higher. Both allocations make me feel good—and how you feel about your investments matters. The more confident you are, the more likely you’ll stay invested and keep building wealth by investing more regularly. That’s why, if I receive another influx of cash or want to redeploy existing funds, I’ll likely continue growing this dumbbell strategy.

The dumbbell approach works best when you have new money to invest or idle cash sitting around during uncertain times. However, rebalancing an existing portfolio into a 50/50 split between risk-free and risk assets is a different matter. Your broader asset allocation should reflect your age and stage in life. A 50/50 allocation might be appropriate, but large rebalancing moves can trigger tax consequences you must consider carefully.

Example Of Using The Dumbbell Strategy To Get To An Ideal Overall Net Worth Allocation

For example, suppose I already have a $1 million investment portfolio and inherit $200,000 in cash, bringing my net worth to $1.2 million. At 38 years old with 15 more years of planned work ahead, I’m comfortable taking more risk. I’d be fine investing 90% of my net worth ($1,080,000) in risk assets and starting a side business to pursue growth opportunities.

If my original portfolio consisted of $980,000 in risk assets and $20,000 in cash and bonds, I could easily apply the dumbbell strategy by allocating $100,000 of the new cash to municipal bonds and $100,000 to stocks. This would bring my total to $1,080,000 (90%) in risk assets and $120,000 (10%) in risk-free investments—perfectly aligning with my ideal 90/10 allocation.

A Simple Investing Framework for Peace of Mind and Growth

The dumbbell investing strategy offers a clear and practical way to deploy new cash, especially during times of uncertainty. By allocating capital to both low-risk and high-risk assets, you gain the emotional reassurance of safety while maintaining exposure to upside potential. It’s a flexible approach that can be tailored to your financial goals, risk tolerance, and stage in life.

Whether you’re investing an inheritance, reallocating proceeds from a home sale, or simply sitting on excess cash, the dumbbell strategy provides structure without sacrificing opportunity. Best of all, it helps you stay motivated and confident—two essential ingredients for long-term investing success.

So the next time you find yourself with idle cash and decision paralysis, consider the dumbbell approach. You just might sleep better at night while still building wealth during the day.

Readers, have you ever considered using the dumbbell investing strategy during times of uncertainty? What potential flaws or additional benefits do you see with this approach? I’d love to hear your thoughts.

Balance Risk and Reward With a Free Financial Check-Up

If you’re sitting on new cash or reevaluating your portfolio during uncertain times, a second opinion can make all the difference. One smart move is to get a free financial check-up from a seasoned Empower financial advisor.

Whether you have $100,000 or more in taxable accounts, savings, IRAs, or a 401(k), an Empower advisor can help you spot hidden fees, unbalanced allocations, or overlooked opportunities to improve your risk-adjusted returns. It’s a no-obligation way to stress-test your current strategy—whether you’re building a dumbbell portfolio or considering a full rebalance.

Clarity brings confidence. And when it comes to investing, confidence helps you stay the course.

The statement is provided to you by Financial Samurai (“Promoter”) who has entered into a written referral agreement with Empower Advisory Group, LLC (“EAG”). Click here to learn more.

Diversify Beyond Stocks and Bonds

A classic dumbbell strategy includes bonds and equities—but don’t forget about real estate. I like to treat real estate as a hybrid: it offers the income stability of bonds with the potential appreciation of stocks.

I’ve invested over $400,000 with Fundrise, a platform that allows you to passively invest in diversified portfolios of residential and industrial properties—many in the high-growth Sunbelt region. With over $3 billion in assets under management and a low $10 minimum, Fundrise has been a core part of my investment strategy, especially when I’ve had cash to redeploy.

Fundrise also offers Venture, giving you access to private AI companies like OpenAI, Anthropic, and Databricks. As mentioned earlier, I’m heavily focused on AI’s transformative potential and want exposure not just for returns—but for my kids’ future too.

With a dumbbell strategy, it’s not just about balance—it’s about positioning yourself for both security and growth. Fundrise is a long-time sponsor of Financial Samurai as our investment philosophies are aligned.

To increase your chances of achieving financial independence, join 60,000+ readers and subscribe to my free Financial Samurai newsletter here. Financial Samurai began in 2009 and is the leading independently-owned personal finance site today. Everything is written based off firsthand experience. 

The Capital Group Dividend Value ETF (CGDV 0.37%) is one of the largest exchange-traded funds focused on dividend-paying stocks. The fund has nearly $17.7 billion in assets under management (AUM), ranking as the eighth largest fund dedicated to dividend investment. Its focus on dividends makes it a popular option for those seeking passive income.

While CGDV is one of the largest and most popular dividend ETFs, that doesn’t necessarily mean it’s the best for passive income. Here’s a closer look at the fund and how it compares with other top dividend ETFs.

A closer look at the Capital Group Dividend Value ETF

The Capital Group Dividend Value ETF is an actively managed fund that seeks to invest in companies that produce above-average dividend income and can grow in value. It primarily invests in larger U.S. companies that pay dividends. However, the fund will invest up to 10% of its assets in larger companies outside the U.S. and some stocks that don’t currently pay dividends but have the potential to pay them.

CGDV currently has about 50 holdings, 90% of them U.S.-based, with 7% based outside the United States, and the remaining 3% consisting of cash. It has a reasonably diversified portfolio of dividend stocks by sector, led by technology stocks at 22%. Here’s a snapshot of its top five holdings:

• Microsoft, 6.4% of the fund’s holdings: While the technology giant has a rather low dividend yield at less than 1%, it was the largest dividend payer in the world last year, at nearly $23 billion. It has also increased its payment for 20 straight years, including by more than 10% last year.
• Broadcom, 5.6%: The semiconductor and software company has a dividend yield below 1%. It has increased its dividend for 14 straight years, including by 11% last year.
• RTX, 4.7%: The aerospace and defense contractor has a nearly 2% dividend yield. It has paid cash dividends every year since 1936 and raised its payment by 7.9% this year.
• British American Tobacco, 4.1%: The tobacco company has a dividend yield exceeding 6%. It has grown its dividend at a 5% compound annual rate over the past decade.
• GE Aerospace, 4.1%: The aerospace company has a roughly 0.5% dividend yield. It increased its dividend nearly 30% earlier this year.

As those top holdings show, the fund holds a mix of higher-yielding dividend stocks and lower-yielding but faster-growing dividend payers.

Over the past 12 months, CGDV has paid dividends equating to a 1.5% yield. That’s above the S&P 500‘s average of less than 1.5%.

Is CGDV the best dividend ETF for passive income?

The Capital Group Dividend Value ETF provides investors with an above-average dividend yield compared with the S&P 500, making it a better option than the broader market index for those seeking passive income.

However, several other ETFs have higher dividend yields. For example, the iShares Core High Dividend ETF (HDV 0.18%) has a 3.5% dividend yield based on its payments over the trailing 12 months. Meanwhile, the SPDR Portfolio S&P 500 High Dividend ETF (SPYD 0.28%) has a dividend yield of around 4.5%.

iShares Core High Dividend ETF is a passively managed fund that tracks the performance of the Morningstar Dividend Yield Focus Index. That index screens for companies with attractive dividend yields and strong financial qualities. The fund holds 75 companies. Its top holdings all have well-above-average dividend yields, and most companies have solid records of increasing their dividend payments.

SPDR Portfolio S&P High Dividend ETF is also a passively managed fund. It aims to track the S&P 500 High Dividend Index, which measures the performance of the top 80 high-dividend-yielding companies in the S&P 500.

In addition to their higher yields, these funds also have lower costs. The actively managed Capital Group Dividend Value ETF has a 0.33% ETF expense ratio. That compares with 0.08% for the iShares Core High Dividend ETF and 0.07% for the SPDR Portfolio S&P High Dividend ETF. Put another way, every $10,000 invested in CGDV would cost $33 annually, compared with $8 for HDV and $7 for SPYD. CGDV’s higher costs eat into the dividend income it would have paid to investors.

A good dividend ETF, but not the best for passive income

The Capital Group Dividend Value ETF is a solid fund for those seeking to invest in companies with above-average dividend yields and solid growth profiles. Those features could enable the fund to produce attractive total returns over the long term.

However, it’s not the best dividend ETF if your goal is generating passive income. It has a much lower yield and higher expense ratio than other top dividend ETFs, such as the iShares Core High Dividend ETF and the SPDR Portfolio S&P High Dividend Those ETFs are better options for those currently seeking to generate more passive income.

Matt DiLallo has positions in Broadcom. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends British American Tobacco, Broadcom, GE Aerospace, and RTX and recommends the following options: long January 2026 $395 calls on Microsoft, long January 2026 $40 calls on British American Tobacco, short January 2026 $40 puts on British American Tobacco, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

I recently received a question that boils down to this: How do you know when you have enough money? And once you do, when is it time to shift from chasing excess returns to simply maintaining what you have?

There are several ways to approach this question, which I’ll explore in this post. I’ve come up with a framework that I think makes sense for those who think they truly have enough.

Here’s the question presented from a reader.

Hi Sam,

I just finished your piece on risk-free passive income—really well done. A very accurate depiction of the trade-offs between the two approaches.

I have a question for you: You illustrate the comparison using a $5 million portfolio. I’m curious—at what wealth level does the appeal of building more wealth start to fade, and when does preserving capital with 2%–3% returns plus inflation protection become the primary objective?

I fully agree that wealth building is still relevant at the $5 million level. But what about at $10 million? $15 million? Or does it take more? Let’s assume a 3.75%–4% yield and inflation-beating dividend growth (say, via SCHD). Real estate could match this as well, but I question whether it truly qualifies as passive.

At what point in the journey does playing defense and focusing on income stability outweigh the pursuit of more wealth? When is it time to stop chasing and just maintain?

Thanks,

Jim

The Elusive Concept of “Enough”

“Enough” is subjective. For some, there’s never enough money—enough is always a moving target, 2X more than what they think they want once they get there.

For others, it might mean having 25X to 50X their annual expenses in investments, multiples I think are appropriate for 80% of people to answer what enough is. I personally like using the inverse of the FS Withdrawal Rate as a guide.

Spend $50,000 a year? You have enough if you have between $1.25 million – $2.5 million. If the 10-year bond yield declines to 3%, then you’d divide $50,000 by 2.4% (3% X 80%) if you use my FS withdrawal rate to get to $2,083,333. My safe withdrawal rate is a dynamic safe withdrawal rate that changes with economic conditions. It helps families build generational wealth.

However, I believe the best way to know you have enough money is this: you refuse to trade your time doing something you don’t fully enjoy for money.

What you enjoy is, of course, also highly subjective. But it should be something you like doing at least 90% of the time or you feel at least 90% of the activity is enjoyable.

The Real Test: Will You Walk Away?

The clearest indicator that you have enough money is your willingness to walk away from a job—or an activity—that drains you.

You can rationalize your way into staying. You might tell yourself: “I don’t need the money.” But if you’re still clocking in at a job you dislike, you’re not being honest. Time is more valuable than money, so if you really had enough, you wouldn’t be doing something you dislike.

Now, I know some of you who are financially independent on paper will say, “But I love my job.” And that’s awesome. Seriously—you’ve hit the career lottery. Keep going. Nobody quits or retires early from a job they dislike.

But I also know many more are saying that out of fear—afraid to let go of a steady paycheck, afraid of losing structure or identity. And if that’s the case, I challenge you: muster the courage to engineer your layoff or find a path out. That’s when you’ll know you’ve reached enough.

Questions to Ask Yourself If You Think You Have Enough Money

To help determine whether you have the courage to stop doing something you don’t enjoy just for the money, ask yourself:

• Would you rather take care of your baby during their precious first year of life, or sit in endless meetings every day?
• Commute during rush hour, or sleep in and read a good book?
• Work late for a month to finish a project, or spend that time playing with your kids or helping them with schoolwork?
• Travel for business for weeks at a time, or care for an aging parent with health issues?
• Meet monthly and quarterly sales quotas, or play pickleball in the late morning and take a nap after?
• Play corporate politics to get promoted, or enjoy the freedom to be your true self and only spend time with people you like?
• Fly out on a Sunday afternoon for a Monday morning client meeting, or travel the world with no set return date?

If given the choice, who would honestly choose the work option in any of these scenarios?

Please, be honest with yourself. Your financial independence number is not real if you continue to subject yourself to displeasure after getting there.

When Is It Time To Stop Chasing More Wealth and Just Maintain?

Once you have enough money, logic would dictate that you no longer need to take financial risks. Instead, you could simply invest your entire net worth into risk-free or low-risk investments that at least keep up with inflation.

These types of investments that generate risk-free income include:

• Money market funds (though yields may not always match or beat inflation)
• Treasury bonds (yields are generally higher than inflation)
• AAA municipal bonds (nearly risk-free and usually yield more than inflation)

The reality, however, is that stocks and real estate have historically been the best-performing asset classes when it comes to beating inflation over the long term. Cryptocurrency—specifically Bitcoin—is also a contender. But as we all know, none of these are risk-free.

Furthermore, nobody is ever truly content with what they have when they know there’s a decent chance of having more given enough time in the market.

Divide Your Wealth Into Risk-Free and Risk-Required Buckets

If you truly believe you have enough money, the best strategy is to allocate a portion of your net worth into completely risk-free or low-risk investments. This bucket should generate enough passive income to cover 100% of your living expenses. In other words, ringfence a portion of your net worth that will take care of you for life, no matter what happens.

Once you’ve secured this financial base, you can then invest the remainder of your wealth in riskier assets for potentially greater returns, without the stress of needing those returns to survive. Think about this portion of your investments as playing with the houses money.

A Fat FIRE Example:

Let’s say your desired annual household spending is $400,000. You’re fortunate to have a top 1% net worth of $14 million. At a 4% safe withdrawal rate, you’d allocate $10 million ($400,000 / 0.04) into Treasury bonds yielding over 4% or similarly safe investments.

You can then invest the remaining $4 million into stocks, real estate, venture, crypto, or any risk asset you want. Even if you lose half—or all—of this risk bucket, your lifestyle remains fully supported by your safe assets.

A Lean FIRE Example:

Let’s say you and your spouse have no children and are content spending $50,000 gross a year. Your net worth is $1.5 million. At a 4% safe withdrawal rate, you would allocate $1.25 million to risk-free or low-risk investments, and invest the remaining $250,000 in riskier assets for possible upside.

Now, of course, allocating 83.3% of your net worth to safe assets might seem extreme. But if you’re truly satisfied with what you have, then this asset allocation makes perfect sense. Especially when the Treasury yield is greater than inflation, as it often is—since inflation helps determine bond yields in the first place.

If you’re uncomfortable with such a conservative approach, then perhaps you don’t actually feel like you have enough. On paper, you might be financially independent, but emotionally and psychologically, you’re not there yet.

You’re still willing to risk losing money for the chance of having more that you want or think you need. Or you’re still encouraging your spouse to work or you’re still working hard on generating supplemental income.

And that’s OK. Just be honest with yourself about whether you truly have enough.

The Ideal Percentage of Your Net Worth in Risk-Free Assets

You might think the ideal situation is being able to allocate the smallest percentage of your net worth to risk-free assets while still being able to cover your desired living expenses. The lower the percentage, the richer you appear to be. But having too small a percentage in risk-free assets might also suggest you’re overly frugal or not generous enough with your time and wealth.

For example, let’s say you have a $10 million net worth, the ideal net worth to retire according to a previous FS survey, and only spend $40,000 a year. At a 4% rate of return, you’d only need to allocate 10%—or $1 million—into risk-free investments to cover your expenses. But what’s the point of having $10 million if you’re only living off 10% of it? You could have saved all the stress and energy slaving away when you were younger.

Sure, investing the remaining $9 million in risk assets to potentially double it in 10 years sounds exciting. But again, what’s the point if you’re not spending it or using it to help others? Money

A More Balanced Approach: 20%–50% In Risk-Free Investments

Once you have enough, the ideal percentage of your net worth in risk-free assets is somewhere around 20% to 50%. Within this range, you’re likely spending enough to enjoy the fruits of your labor—say, $80,000 to $200,000 a year, continuing the earlier example. At the same time, you still have a significant portion of your net worth—50% or more—invested in risk assets that have historically outpaced inflation.

Even if you no longer need more money, it would be unwise to bet against the long-term returns of stocks, real estate, and other growth assets. And if your risk investments do well, you can always use the extra gains to support your children, grandchildren, friends, relatives, or organizations in need.

When in doubt, split the difference: 50% risk-free, 50% risk assets. It’s a balanced, emotionally comforting strategy that gives you both security and upside.

Nobody Is Going to Follow My Recommended Risk-Free Percentages

Despite the logic, very few people who believe they have enough money will follow this 20%–50% allocation guide. Why? Two reasons:

1. Greed – We all want more money, especially more than our peers.
2. An Unrealistic Fear of the Worst – We catastrophize worst-case scenarios that rarely happen.

Ironically, these two emotions often lead us to take more risk than necessary in pursuit of money we don’t actually need. The result is usually working far longer than necessary and/or dying with far more money than we can ever spend.

There’s also a positive reason many of the multi-millionaires I consult with give for why they keep grinding: the simple challenge of making more. They see it as a game—running up the score through productive efforts like building a business, gaining more clients, or conducting investment research and taking calculated risks.

My Reason to Take More Risk: A Clear Forecast for Higher Expenses

I left corporate America in 2012 because I believed $3 million was enough for my wife and me to live a modest lifestyle in expensive cities like San Francisco or Honolulu. And it was as we could comfortably live off $80,000 a year. The courage to leave was helped by negotiating a severance package that covered at least five years of normal living expenses.

But instead of putting my roughly $2.7 million in investable assets (excluding home equity) into Treasury and municipal bonds, I chose to invest 98% in stocks and rental properties. At 34, I knew I was too young not to take risk—especially since we appeared to be recovering from the global financial crisis. I even dumped my entire six-figure severance check into a DJIA index structured note.

My wife also wanted to leave her job by age 35, which added more pressure to grow our net worth. I also knew that having children would cause our annual expenses to balloon—especially if we stayed in San Francisco. Unsubsidized healthcare and preschool tuition alone could run an extra $4,000–$5,000 a month after tax. With a second child, our monthly costs could easily rise by another $3,000–$4,000.

Putting the 20% – 50% Into Risk-Free Investments To The Test

With a $3 million net worth, my recommended percentages into risk-free investments would be between $600,000 to $1.5 million. At a 4% rate of return, that would generate $24,000 – $60,000. Unfortunately, we wanted to live off $80,000 a year.

At 34, I simply wasn’t rich enough. Covering $80,000 a year in pre-tax expenses through risk-free income at 4% would require allocating $2 million. That means, at a 20% allocation, I would’ve needed to retire with at least $10 million!

In hindsight, the most reasonable allocation to risk-free investments would have been 50%. To do that, I would have needed an extra $1 million in capital—raising my target net worth to $4 million.

This makes sense because one of my biggest regrets about retiring early was doing so too early. If I could do it over again, I would have tried to transfer to another office and worked until age 40—just 5.5 more years. If I had, I would’ve reached at least a $4 million net worth by then, especially given how stocks and real estate continued to rise.

Ah, being able to back up what I felt I should have done with objective math is a wonderful feeling! Instead of accumulating a $1 million greater net worth, I just spent time earning online income to make up for the risk-free gross passive income gap of $20,000 – $56,0000 a year. It was an enjoyable and effective process.

Fear Of A Difficult Future Pushes Me To Continue Taking Risk

Today, I could sell a large portion of my investments and move the proceeds into risk-free Treasury bonds to cover our desired living expenses. But the tax bill would be immense.

Instead, I’d much rather allocate the majority of new money I earn toward building up our risk-free investments. Of course, with my relatively low income, that will take time. So the first step was to sell one rental property and reposition some of the tax-free profits into Treasury bonds.

While our investments are worth more than 25X our annual household expenses, only about 5% of our net worth is currently allocated to risk-free or ultra-low-risk assets.

Now that I’ve written this article, I should aim to increase that allocation to 30% by the time I turn 50 in 2027. Based on our current expenses and realistic net worth projections, this range feels appropriate.

If I can make the asset allocation shift, I’ll let you know whether I finally feel 100% financially secure. Please run your own risk-free percentage allocation as well!

Readers, how do you measure whether you truly have enough? Do you think people who say they have enough but continue working at a job they don’t enjoy are fooling themselves? What do you believe is the ideal percentage of your net worth to allocate to risk-free assets in order to confidently cover your living expenses for life? And why do you think we still take investment risks—even when, on paper, we already have enough?

Suggestions To Build More Wealth

For superior financial management, explore Empower, a remarkable wealth management tool I’ve trusted since 2012. Empower goes beyond basic budgeting, offering insights into investment fees and retirement planning. Best of all, it’s completely free.

If you want to achieve financial freedom sooner, pick up a copy of my USA TODAY? bestseller, Millionaire Milestones: Simple Steps To Seven Figures. It’s packed with actionable advice to help you build more wealth than 90% of the population, so you can live free.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

Since the pandemic began, the stock market has proven to be erratic, plunging at times only to quickly recover and launch into fresh bull markets. Today, with plenty of new uncertainty due to issues including President Donald Trump’s trade wars, U.S. fiscal concerns, and the concerning trajectory of the U.S. economy, more volatility is certainly on the docket. That’s why investors may want to check out some dividend stocks, which can provide reliable passive income. The returns of dividend stocks can be much more dependable than those of non-payers, especially if you choose ones with good track records and the ability to grow their earnings and free cash flows so they can keep regularly increasing their payouts.

Here are two dividend stocks that meet those criteria that investors can feel comfortable buying and holding for the next two years.

Nike: A turnaround that will hopefully pay investors more for their patience

The iconic footwear and apparel company Nike (NKE 0.22%) has been less than iconic as a stock lately. It’s now down by about 39% over the last five years (as of June 4). Intensifying competition in the footwear and apparel space, struggles with the brand, and an excessive focus on digital promotions and sales have resulted in the company underperforming in recent years.

To change its trajectory, the board hired longtime Nike veteran Elliot Hill out of retirement to take the helm, and Nike is now deeply entrenched in his turnaround plan. Hill is focused on getting the company back to what it does best — renewing its intense focus on the brand, leading the way on product innovation, and reactivating and improving its sales relationships with wholesalers. Hill also said earlier this year that Nike will be focused on five product areas — running, basketball, football, training, and sportswear — and three markets: the U.S., the United Kingdom, and China.

But as some analysts have pointed out, Nike’s turnaround could take longer than expected, especially if the global trade war continues or if the U.S. economy tips into a recession. A longer turnaround could make it difficult to entice investors to buy and hold the stock, which is why Nike is likely to make paying and raising its dividend a priority. Its yield of about 2.6% at the current share price isn’t bad, but it trails most Treasury yields right now and over the past few years.

In November, Nike increased its quarterly dividend by 8%, marking the 23rd consecutive year the company has hiked the payout. In a couple more years, Nike is likely to join an exclusive club — the Dividend Aristocrats®, which are S&P 500 companies that have increased their payouts for a minimum of 25 straight years. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.)

Its ascension into that group will give Nike added some credibility among dividend investors. Nike also has a trailing 12-month free cash flow yield of 5.66%, more than double its current dividend yield.

Nike has a good dividend track record and clear incentives to keep raising its payouts to reward shareholders for their patience. If its turnaround is successful, that should also enable the company to grow earnings and free cash flow, which will also bolster its capacity to pay higher dividends.

Wells Fargo: Finally on the offensive after seven years

If you’ve followed Wells Fargo (WFC 1.99%), then you know that the bank has been on a bumpy ride over the last decade. In 2016, it came to light that large numbers of employees at the bank had been opening banking and credit card accounts in customers’ names without those customers’ authorization. The scandal evolved into a reputational nightmare for Wells Fargo and cost it billions of dollars in fines and lost profits. Regulators put various restrictions and consent orders on the bank to monitor its actions. In addition, the Federal Reserve in 2018 put an asset cap on it, preventing it from growing its balance sheet above $1.95 trillion — limiting its ability to expand, pursue acquisitions, and make more money. 

In 2019, the bank brought on Charlie Scharf to take over as CEO, and he did a tremendous amount of work to overhaul the bank’s regulatory infrastructure and leadership team. Scharf also significantly cut expenses, sold off non-core assets, and ramped up higher-returning businesses like investment banking and credit card lending.

This year, after Trump returned to the White House, banking regulators under his administration quickly terminated the consent orders that were put in place to monitor its behavior in the wake of the scandal, and just recently lifted the asset cap. That’s a massive deal for the bank, which can now begin to grow its balance sheet again and go on the offensive in the financial services market.

During the pandemic, Wells Fargo was one of the few banks forced to cut its dividend due to regulations put into place by the Federal Reserve. While the bank has been able to regrow its payout, its yield still sits in the bottom half of its peer group.

JPM Dividend Yield data by YCharts.

Furthermore, broader deregulation of the banking sector from Trump and his administrators is likely on the way. I suspect the largest banks will eventually have much lower regulatory capital requirements than they have now, which will allow them to return more capital to shareholders. Furthermore, Wall Street analysts on average currently expect Wells Fargo to grow its diluted earnings per share by about 8% this year and by close to 14% next year, according to data provided by Visible Alpha. Over the last 12 months, Wells Fargo’s dividends only consumed about 31% of earnings, so it should have plenty of opportunities to keep growing its payouts in the coming years.

I’ve been focused on building passive income since 1999, back when I had to be in the office by 5:30 a.m. and worked past 7 p.m. often. Weekends were another eight hours or so. I knew I couldn’t sustain a traditional 40-year career working those kinds of hours, so I began saving and investing aggressively to break free by 40.

Now I’m focused again on building enough passive income to fully cover our family’s desired living expenses by December 31, 2027. And I’ve been reminded of an ongoing battle: the trade-off between generating risk-free passive income versus taking risk to earn higher potential returns.

As I’ve gotten older, I’ve become more risk-averse, partly because the dollar amounts at stake have grown.

Losing $20,000 on a $100,000 portfolio feels like a kick in the shins. But watching $1 million evaporate from a $5 million portfolio? That hits like you like a truck crossing the sidewalk. Without any day job income—as is the case for me and my wife—losses of that magnitude can feel unbearable.

This post will cover the following important topics:

• The trade-off between earning risk-free passive income and taking more risk for potentially greater returns
• How focusing too much on risk-free passive income can lead to increased fear and potentially lower wealth
• The distinction between risk-free passive income and risk-required passive income and why it matters
• The importance of sticking to your financial goals and risk tolerance no matter how much greed and fear take hold

Earning Risk-Free Passive Income Can Make You More Fearful

One important takeaway from building a rich Bank of Mom and Dad is that it gives your adult children the option to take more risks. The more risks they can afford to take, the higher their potential for financial success.

It’s like shooting 100 three-pointers at a pitiful 10% accuracy versus just 10 shots at an incredible 60%. Although you may be a far more talented shooter, you’ll still lose to the volume shooter. This is why a lot of rich people from rich families have an unfair advantage and keep getting richer.

But before you can be a supportive bank for your kids, you need to be a strong bank for yourself.

Ironically, the more risk-free passive income I earn, the less motivated I feel to take on risk. And with less desire to take risk comes less potential wealth in the future.

Fear, complacency, and diminished wealth are the hidden dangers of relying too heavily on risk-free passive income.

Let me explain further.

From Taking A Lot Of Risk To Throttling Back Risk

In May 2025, I began trimming some of the stock positions I bought during the March–April dip. I had just sold a property in March and begun reinvesting most of the proceeds in the stock market. At first, I was losing my shirt as the stock market kept dipping through the first half of April. Then, my portfolio began to recover and profit.

I’m in the process of moving from a 100% equities portfolio to around a 60/40 split between equities and Treasuries/cash. I had invested over $1.35 million in stocks during the downturn and it was stressful. In retrospect, going all-in on my public investment portfolio that I rely on to provide for my wife and me to stay unemployed felt reckless. I was relieved to have a second chance to de-risk and rebalance.

That month, my Fidelity money market fund (SPAXX) paid me $1,847.62. Annualized, that’s $22,171 in risk-free income just for keeping a chunk of cash parked. That return, at 4%, required no stress, no tenant calls, no market-timing anxiety, and no risk. It felt amazing! I want to earn more risk-free passive income.

However, as the S&P 500 continues to climb, that amazing feeling gradually fades. This is a fundamental struggle every investor must face—the tension between feeling secure and still wanting more. After all, roughly 75% of the time, the S&P 500 delivers a positive return in any given year.

Risk-Free Passive Income vs. Risk-Required Passive Income

Thanks to the rise in interest rates, we all now have the opportunity to earn more risk-free passive income. As a result, we not only have to weigh how we feel about earning different types of risk-required passive income, but also how we feel about earning risk-free income versus taking on more risk for potentially higher returns.

As an investor, we must always think about opportunity cost.

For example, comparing risk-required passive income from a dividend aristocrat ETF like NOBL, which yields about 2.15%, with income from an S&P 500 ETF like SPY, which yields around 1.25%, isn’t a huge leap. NOBL may be slightly less volatile since it holds cash-rich, large-cap names.

But compare either of those to earning 4% risk-free in a money market fund, and the difference in feeling can be stark. After a 20% market dip, trying to claw back to a 10% historical annual return feels exhausting. Earning 4% with no drama felt peaceful.

At the same time, I didn’t have to manage tenants or respond to maintenance issues like I do as a landlord. Even though I’m bullish on San Francisco single-family homes over the long term—thanks to the AI boom—I still preferred the risk-free income at this high rate.

This easy, risk-free passive income has made me less motivated to chase bigger returns, which is a problem if I want to hit my $380,000 passive income goal by December 31, 2027.

This is the curse of the rising risk-free rate of return. When the risk-free rate was under 1%, it was much easier to invest aggressively in risk assets.

Too Much Focus On Earning Risk-Free Income Can Make You Less Wealthy Over Time

I still have a $60,000 shortfall in gross passive income. To close that gap, I’d need to accumulate another $1.5 million in capital in under three years, no small feat without a high-paying job or a financial windfall.

Authors don’t make much money. A typical book advance is around $10,000. Even a top 1% advance—starting at $250,000—is paid out over several years. Meanwhile, AI is eroding search engine traffic and attribution, weakening online income for independent publishers who write all their work like me.

Treasury bonds and money market funds likely won’t get me there in time. The main way to achieve my goal of accumulating $1.5 million or more is to take more risk by investing in risk assets.

Imagine entirely sitting out the 2023 and 2024 bull market with back-to-back 20%+ gains given you found risk-free Treasuries yielding over 4% too enticing. Sure, you’d still be up, but you’d lag far behind those who went all-in on stocks. Over time, focusing too much on risk-free passive income could, ironically, make you poorer.

It’s the dividend vs. growth stock dilemma: dividend-paying companies are considered safer and often return cash because they’ve run out of better investment opportunities, while growth companies reinvest 100% of earnings to capture potentially higher returns. In this case of risk-free passive income, the dividend-paying company is the U.S. government.

For over 25 years, I’ve invested almost entirely in growth stocks. This is now changing thanks to age, wealth, and higher risk-free rates.

Principal Growth Versus Income Dilemma

Let’s say you have a $5 million stock portfolio. To generate an additional $1.5 million in capital, you’d need a 30% return—possible over three years. But stocks could just as easily go nowhere or even decline, especially with valuations already stretched.

Remember, if stocks stagnate for three years, you’re effectively losing money compared to what you could have earned in a risk-free investment over the same period.

Given today’s high valuations, many analysts are forecasting low single-digit returns going forward. Below is a chart showing Vanguard’s 10-year forecast for equities, fixed income, commodities, and inflation from 2025 to 2035. So far, it’s actually quite prescient with U.S. equities struggling while global equities outpetforming.

A 3%–5% annual return in U.S. equities isn’t exactly exciting given the risks involved.

The Guaranteed Path Can Lull You Into Complacency

Now imagine putting that $5 million into 10-year Treasuries yielding 4.5%. That generates $225,000 a year—guaranteed. So compelling! It would take six years to grow from $5 million to $6.5 million, but it’s essentially a sure thing. If you believe Vanguard’s U.S. equities forecast of 3%–5% annual returns over the next 10 years, why not lock in a 4.5% risk-free return today?

Would you risk allocating 100% of your portfolio in equities just to maybe get there in three years? After two strong years (2023 and 2024), another three years of 9%+ annual returns to get to $6.5 million would be extraordinary, but that outcome is far from guaranteed.

Yet most of us still take some risk, driven by hope and greed. We hope that AI will permanently boost productivity and reset stock valuations higher. We also greedily want even more returns than the historical average.

Higher Risk-Free Passive Income Should Result In A More Balanced Portfolio

I’m no longer as greedy as I was in my 20s and 30s, partly because I’m more financially comfortable today. The other reason is the much higher risk-free rate of return.

As a result, it makes sense to increase the bond or cash portion of your portfolio if it’s offering higher returns.

With 40% in Treasuries held to maturity, a $5 million portfolio generates $90,000–$112,500 in risk-free income. With 60% in equities, there’s still meaningful upside potential without putting everything on the line.

Historically, a 60/40 stocks and bonds portfolio has returned about 9.1%. A 100% stock portfolio has returned about 10.3%. That 1.2% gap adds up over decades. But if you’re later in your financial journey, the tradeoff may not be worth it. A 100% stock portfolio can suffer much steeper drawdowns—up to 85% more based on history.

The Importance Of Sticking To Your Financial Goals

At this point in my life, I’m content with a steady 5%–8% annual return in my taxable portfolio for survival. Based on history, a 30% stock / 70% bond portfolio would suffice.

Yet, because of my lingering greed, I’m constructing a 60/40 portfolio instead. Further, I’m still 100% invested in public stocks across all my tax-advantaged retirement accounts, my kids’ custodial accounts, and their Roth IRAs.

In other words, I’ve taken a more conservative approach with the portfolio I rely on to support my family today, and a more aggressive approach with the portfolios that won’t be touched for 15+ years. Unfortunately, I feel the job market is bleak for my children, so I want to hedge by investing more for their futures.

If you want to retire early, building a large taxable portfolio beyond your tax-advantaged accounts is essential. This is the portfolio that generates passive income and provides tappable equity—without penalties—to live on. Not building a large taxable portfolio consistently comes up as one of the top regrets for older workers and retirees.

Age and Stage Matter For How You Invest

If you’re under 40, feel free to take more risk. You’ve got time, energy, and decades of work ahead to recover from losses. I wish I had taken more risk in my 20s and 30s for sure. Here’s my suggested asset allocation for stocks and bonds by age.

But when you’re over 40, with family obligations and reduced energy, it’s different. You don’t want to lose the wealth you’ve spent 20+ years building. Reducing your risk exposure as your risk tolerance fades is a wise move.

For me, I’m tired from being a stay-at-home parent and writing my second traditional book, Millionaire Milestones. By 2027, I’ll be 50, holy crap! Where did all the time go?

I plan to publish a third and final book, then transition into a more traditional retirement lifestyle—one with less doing and more being. By then, AI might have rendered Financial Samurai obsolete or automated me out of the process entirely. Who knows? Maybe lived experiences from real human beings will no longer be in demand.

So I’m embracing preservation more today.

I’ll keep saving and investing 50% of any income, splitting a portion of it between stocks and bonds at a 60/40 ratio. I’ll also continue allocating capital to private AI companies through platforms like Fundrise Venture to stay in the game. Frankly, every $1,000 I invest in AI makes me feel a little less worried about my children’s future.

But I won’t be going overweight in public stocks anytime soon with valuations around ~22X forward earnings. Until I sold my house, I never had this much cash available to take advantage of higher interest rates. While climbing the property ladder, I was always saving to buy a nicer home.

Now, I have no more material wants that can’t be covered by cash flow. Tennis shoes don’t cost too much. And the risk-free passive income I can earn today is simply too good to pass up.

The Gift and Risk of a High Risk-Free Rate

A high risk-free rate is a double-edged sword. On the one hand, it offers comfort and stability. But if you lean on it too heavily too early, you might delay reaching financial independence. The longer you delay, the harder it becomes to catch up—often requiring more risk when you’re least comfortable taking it.

On the other hand, if you’re close to financial independence or already retired, today’s elevated rates are a gift. When I left work in 2012, the 10-year Treasury yield was just 1.6%. I had to go risk-on with stocks and real estate. Now, earning 4%–4.5% risk-free feels like a blessing, especially with a family to support.

Sweet, risk-free passive income has never felt so good, but it likely won’t last forever. And that could be a good thing!

Readers, what are your thoughts on becoming more risk-averse as you earn more passive income over time? Has your focus on investing in dividend stocks or earning higher yields/income actually throttled your wealth-building potential? Are you willing to risk more money for greater returns that you don’t need?

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